Preparation of Bank Reconciliation Statement
Subject: Other
Overview
Various procedures are adopted while preparing bank reconciliation statement. Bank reconciliation statement can be prepared either by taking balance from the cashbook or passbook as a basis. This note has information about the preparation of bank reconciliation statement.Preparation of Bank Reconciliation Statement
Bank Overdraft
Bank overdraft is an amount overdrawn from the bank. It is a loan facility provided by the bank to its customers by which they are entitled to draw more amount than what is in their account. On the amount of overdraft, the bank also charges some interest by debiting the customers’ account in the bank. Bank overdraft is a situation of negative bank balance, that is, debit balance of pass book.
Preparation of Bank Reconciliation Statement
The following procedures are followed while preparing the bank reconciliation statement:
- Compare cash book and pass book items.
- Give sign to all the items of cash book and pass book which are matched with each other.
- Make a list of unmatched items found in the cash book and pass book.
- Prepare bank reconciliation statement taking balance either from the cash book or pass book as a basis.
- Adjust the items which cause the disagreement in the balances.
- Add the items that have decreased the balance on the book with which reconciliation is to be made. On the contrary, subtract the amount of those items which have increased the balance.
If the causes of disagreement between the cash book and pass book balances are given, the bank reconciliation statement can be prepared either by taking the balance of cash book or pass book. The bank reconciliation statement can be prepared by using either of the following bases:
- Debit balance shown by cash book
- Credit balance shown by cash book (overdraft)
- Credit balance shown by pass book
- Debit balance shown by pass book (overdraft)
Debit balance shown by cash book
In this case, it is to be seen whether a particular item increases or decreases the favourable balance of the pass book. Those items which decrease the pass book balance are to be subtracted. The specimen of a bank reconciliation statement are as follows:
Bank Reconciliation Statement
As on ……………….
| Particulars | Amount Rs. | Amount Rs. |
| Bank balance as per cash book | *** | |
| Add: | ||
| Cheque issued but not presented for payment | *** | |
| Interest allowed or credited by bank but not entered in cash book | *** | |
| Cheques deposited or paid into the bank but not recorded in cash book | *** | |
| Interest, dividend and other incomes collected by the bank but not entered in cash book | *** | |
| Bills receivable directly collected by the bank | *** | |
| Amount deposited by a customer directly into the bank | *** | |
| Cheque issued but returned dishonoured | *** | |
| Any amount wrongly credited by the bank | *** | *** |
| *** | ||
| Less: | ||
| Cheque received and entered in the cash book but not yet sent to the bank for the collection | *** | |
| Cheque deposited or paid into the bank but not yet collected by the bank | *** | |
| Bank charges, commission and interest on overdraft charged by the bank | *** | |
| Insurance premium and other payments paid directly by bank understanding instructions but not entered in cash book | *** | |
| Cheques deposited for collection but returned dishonoured and no entry has been made in the cash book | *** | |
| Dishonor of bills discounted by the bank but not recorded in cash book | *** | |
| Any item wrongly debited by bank | *** | *** |
| Balance as per pass book | *** |
Overdraft balance (Credit Balance) shown by the cash book
In such a case, overdraft balance can be shown in the brackets for indicating, it is a ‘minus item’ and all items should be adjusted in the same way as presented below:
Bank Reconciliation Statement
As on ……………….
| Particulars | Amount Rs. | Amount Rs. |
| Bank overdraft as per cash book | (***) | |
| Add: | ||
| Cheque issued but not presented for payment | *** | |
| Interest allowed or credited by bank but not entered in cash book | *** | |
| Cheques deposited or paid into the bank but not recorded in cash book | *** | |
| Interest, dividend and other incomes collected by the bank but not entered in cash book | *** | |
| Bills receivable directly collected by the bank | *** | |
| Amount deposited by a customer directly into the bank | *** | |
| Cheque issued but returned dishonoured | *** | |
| Any amount wrongly credited by the bank | *** | *** |
| *** | ||
| Less: | ||
| Cheque received and entered in the cash book but not yet sent to the bank for the collection | *** | |
| Cheque deposited or paid into the bank but not yet collected by the bank | *** | |
| Bank charges, commission and interest on overdraft charged by the bank | *** | |
| Insurance premium and other payments paid directly by bank understanding instructions but not entered in cash book | *** | |
| Cheques deposited for collection but returned dishonoured and no entry has been made in the cash book | *** | |
| Dishonor of bills discounted by the bank but not recorded in cash book | *** | |
| Any item wrongly debited by bank | *** | *** |
| Bank overdraft as per pass book | *** |
If the overdraft shown by the cash book is used with the (+) sign, the items which cause difference will be adjusted the other way, viz, the items which previously added will be subtracted and vice versa.
Bank Reconciliation Statement
As on ……….
| Particulars | Amount Rs. | Amount Rs. |
| Bank overdraft as per cash book | *** | |
| Add: | ||
| Cheque received and entered in the cash book but not yet sent to the bank for the collection | *** | |
| Cheque deposited or paid into the bank but not yet collected by the bank | *** | |
| Bank charges, commission and interest on overdraft charged by the bank | *** | |
| Insurance premium and other payments paid directly by bank understanding instructions but not entered in cash book | *** | |
| Cheques deposited for collection but returned dishonoured and no entry has been made in the cash book | *** | |
| Dishonor of bills discounted by the bank but not recorded in cash book | *** | |
| Any item wrongly debited by bank | *** | *** |
| *** | ||
| Less: | ||
| Cheque issued but not presented for payment | *** | |
| Interest allowed or credited by bank but not entered in cash book | *** | |
| Cheques deposited or paid into the bank but not recorded in cash book | *** | |
| Interest, dividend and other incomes collected by the bank but not entered in cash book | *** | |
| Bills receivable directly collected by the bank | *** | |
| Amount deposited by a customer directly into the bank | *** | |
| Cheque issued but returned dishonoured | *** | |
| Any amount wrongly credited by the bank | *** | *** |
| Bank overdraft as per pass book | *** |
Bank Balance (Credit Balance) shown by the pass book
If credit balance of the pass book is to be taken as a base, the effect of each item which causes the difference in the cash book balance is to be found out. Besides, it is to be seen whether a particular item increases or decreases the cash book balance.
After finding out the effect of each item, those items which increase the cash book balance are to be added and the items which decrease the cash book balance are to be subtracted. The specimen of the bank reconciliation is to be prepared on the basis of bank balance as per pass book is as follows:
Bank Reconciliation Statement
As on ………
| Particulars | Amount Rs. | Amount Rs. |
| Bank Balance as per pass book | *** | |
| Add: | ||
| Cheque received and entered in the cash book but not yet sent to the bank for the collection | *** | |
| Cheque deposited or paid into the bank but not yet collected by the bank | *** | |
| Bank charges, commission, bank overdraft so then charges deposited by the bank but not entered in cash book | *** | |
| Cheques deposited for collection but returned dishonoured and no entry has been made in the cash book | *** | |
| Payment made by the bank directly on standing instruction | *** | |
| Discounted bills dishonoured but not recorded in cash book | *** | |
| Any amount wrongly debited by the bank | *** | *** |
| *** | ||
| Less: | ||
| Cheques issued but not presented for payment | *** | |
| Interest allowed and credited by the bank but not entered in cash book | *** | |
| Cheques deposited and paid into the bank but not recorded in the cash book | *** | |
| Interest, dividend and other incomes collected by the bank but not entered in the cash book | *** | |
| Bills receivable directly collected by the bank | *** | |
| Amount deposited by a customer directly into the bank | *** | |
| Cheque issued but returned dishonoured | *** | |
| Any amount wrongly credited by the bank | *** | *** |
| Balance as per cash book | *** |
Bank overdraft (Debit Balance) shown by the pass book
When the bank pass book shows the debit balance (i.e. overdraft) that could be shown in the brackets for indicating (-) minus item and all the adjustments should be adjusted the same way as above. The specimen of the bank reconciliation statement to be prepared on the basis of overdraft balance as per pass book is as follows:
Bank Reconciliation Statement
As on ………
| Particulars | Amount Rs. | Amount Rs. |
| Bank overdraft as per pass book | (***) | |
| Add: | ||
| Cheque received and entered in the cash book but not yet sent to the bank for the collection | *** | |
| Cheque deposited or paid into the bank but not yet collected by the bank | *** | |
| Bank charges, commission, bank overdraft so then charges deposited by the bank but not entered in cash book | *** | |
| Payment made by the bank directly on standing instruction | *** | |
| Cheques deposited for collection but returned dishonoured and no entry has been made in the cash book | *** | |
| Dishonor of bills discounted by the bank but not recorded in cash book | *** | |
| Any amount wrongly debited by bank | *** | *** |
| *** | ||
| Less: | ||
| Cheque issued but not presented for payment | *** | |
| Interest allowed or credited by bank but not entered in cash book | *** | |
| Cheques deposited or paid into the bank but not recorded in cash book | *** | |
| Interest, dividend and other incomes collected by the bank but not entered in cash book | *** | |
| Bills receivable directly collected by the bank | *** | |
| Amount deposited by a customer directly into the bank | *** | |
| Cheque issued but returned dishonoured | *** | |
| Any amount wrongly credited by the bank | *** | *** |
| Bank overdraft as per cash book | *** |
In this case also, if we don’t want to show the overdraft amount indicating the minus sign(-), the items added above are to be deducted and deducted item are to be added:
Bank Reconciliation Statement
As on ……………….
| Particulars | Amount Rs. | Amount Rs. |
| Bank overdraft as per pass book | *** | |
| Add: | ||
| Cheque issued but not presented for payment | *** | |
| Interest allowed or credited by bank but not entered in cash book | *** | |
| Cheques deposited or paid into the bank but not recorded in cash book | *** | |
| Interest, dividend and other incomes collected by the bank but not entered in cash book | *** | |
| Bills receivable directly collected by the bank | *** | |
| Amount deposited by a customer directly into the bank | *** | |
| Cheque issued but returned dishonoured | *** | |
| Any amount wrongly credited by the bank | *** | *** |
| *** | ||
| Less: | ||
| Cheque received and entered in the cash book but not yet sent to the bank for the collection | *** | |
| Cheque deposited or paid into the bank but not yet collected by the bank | *** | |
| Bank charges, commission, bank overdraft so then charges deposited by the bank but not entered in cash book | *** | |
| Payment made by the bank directly on standing instruction | *** | |
| Cheques deposited for collection but returned dishonoured and no entry has been made in the cash book | *** | |
| Dishonor of bills discounted by the bank but not recorded in cash book | *** | |
| Any amount wrongly debited by bank | *** | *** |
| Bank overdraft as per cash book | *** |
Things to remember
- Those items which decrease the passbook balance are to be subtracted.
- Overdraft balance can be shown in the brackets for indicating, it is a ‘minus item’.
- If credit balance of the passbook is to be taken as a base, the effect of each item which causes the difference in the cash book balance is to be found out.
- It includes every relationship which established among the people.
- There can be more than one community in a society. Community smaller than society.
- It is a network of social relationships which cannot see or touched.
- common interests and common objectives are not necessary for society.
Videos for Preparation of Bank Reconciliation Statement
Bank Reconciliation Statement
Introduction to Bank Reconciliation Statement
Questions and Answers
From the following particulars prepare a bank reconciliation statement:
- Bank balance as per cash book Rs.8,000
- Cheques issued but not presented for payment Rs.5,000.
- Cheques sent for collection of Rs.25,000 has not been yet credited by the bank.
- Rs.900 has been credited in the pass book by the bank.
- Interest of Rs.100 collected and credited by the bank.
Required: Bank Reconciliation Statement
Solution:
Bank Reconciliation Statement
| Particulars | Amount (in Rs.) | |
| Details | Total | |
| Bank balance as per cash book | 8,000 | |
| Add: | ||
| Cheques issued but not presented for payment | 5,000 | |
| Amount wrongly credited in the pass book | 900 | |
| Amount of interest collected and credited by pass book only | 100 | 6,000 |
| Less: | 14,000 | |
| Cheques sent for collection but not yet credited by the bank | 25,000 | 25,000 |
| Overdraft as per pass book | 11,000 | |
Following information are given:
- On Falgun 30th 2072, the pass book of a company showed the balance of Rs.20,000.
- A cheque of Rs.10,000 deposited but not yet credited by the bank.
- Cheques of Rs.5,000 were issued, but cheques of Rs.3,000 only were presented for payment.
- Bank charges debited only in the pass book Rs.1,000.
- A customer directly deposited into the bank Rs.5,000 but not shown in cash book.
- Insurance premium paid by the bank as per instruction of rs.1,500 but not shown in cash book.
- A cheque of Rs.3,000 which was debited in the cash book, is not sent to the bank yet.
Required: Bank Reconciliation Statement
Solution:
| Bank Reconciliation Statement | |
| As on 30th Falgun, 2072 |
| Particulars | Amount (in Rs.) | |
| Details | Total | |
| Balance as per pass book | 20,000 | |
| Add: | ||
| Cheque deposited into the bank but not yet credited by the bank | 10,000 | |
| Bank charge debited in the pass book only | 1,000 | |
| Insurance premium paid by the bank but not shown in the cash book | 1,500 | |
| A cheque debited in the cash book but not yet sent for collection | 3,000 | 15,500 |
| Less: | ||
| Cheque issued but not presented for payment | 2,000 | |
| Amount directly deposited by the customer into the bank | 5,000 | (7,000) |
| Balance as per cash book | 8,500 | |
Following information are given:
- Bank overdraft as per pass book Rs.10,000.
- Bank statement showed a cheque of Rs.1,000 deposited into the bank, but not recorded in the cash book.
- A cheque of Rs.3,000 is deposited but not collected by the bank.
- Bank charges recorded twice in the cash book Rs.100.
- Bills collected by bank but not recorded in the cash book Rs.4,000.
Required: Bank Reconciliation Statement
Bank Reconciliation Statement
| Particulars | Amount (in Rs.) | |
| Details | Total | |
| Bank overdraft as per pass book | (10,000) | |
| Add: | ||
| Cheque deposited into the bank but not collected by the bank | 3,000 | 3,000 |
| (7,000) | ||
| Less: | ||
| A cheque deposited into the bank but not recorded in the cash book | 1,000 | |
| Bank charges recorded twice in the cash book | 100 | |
| Bills collected by the bank but not recorded in the cash book | 4,000 | (5,100) |
| Overdraft as per cash book | (12,100) | |
Cash book showed an overdraft balance of Rs.5,900 on 30th Ashadh, 2070.
- Cheques amounting to Rs.1,850 were sent to the bank for collection but cheques of only Rs.1,380 were credited in the pass book.
- Cheques of Rs.25,000 were issued, but cheques of only Rs.18,000 were presented for payment.
- Rs.150 were debited in the pass book for interest on overdraft.
- A cheque of Rs.135 which was debited in the bank column of the cash book was not sent to the bank.
Required: Bank Reconciliation Statement
| Bank Reconciliation Statement | |
| As on 30th Ashadh, 2070 |
| Particulars | Amount (in Rs.) | |
| Details | Total | |
| Overdraft as per pass book | (9,000) | |
| Add: | ||
| Cheques issued but not yet presented for payment | 7,000 | 7,000 |
| Less: | (2,000) | |
| Cheques deposited into the bank but not yet collected by the bank | 470 | |
| Interest on overdraft debited in the pass book only | 150 | |
| Cheque debited in the cash book but not yet sent for collection | 135 | 755 |
| Overdraft as per pass book | (1,245) | |
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